This month, Independent Mortgage Adviser, Chris, looks at the new mortgage with a 0.89 percent interest rate. Are the fees worth the low rate though? Read more, including this month’s BEST RATES, here.
This does not constitute advice and advice should be sought in all instances before acting on it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
The lowest ever mortgage rate – 0.89%
In April, the lowest ever mortgage rate came onto the market, by Yorkshire Building Society, with a rate of 0.89 percent.
This super low rate would certainly have attracted some homeowners and it may actually be suitable for some too.
However, it is important to not be just dazzled by the low rates of interest. Fees and other factors come into play when deciding on the best mortgage.
This particular low-rate mortgage is a 2 year deal, but it is not a fixed rate. It is linked to the Standard Variable Rate (SVR) so does mean borrowers could experience steep rises to their payments if the base rate rises.
Most importantly though, this deal comes with a fairly substantial fee of £1,495, plus a £90 fee on redemption of the mortgage. If a borrower wants to exit the mortgage before the end of the two-year term, they will incur a one percent redemption penalty.
Comparing mortgage deals
It is essential before committing to any mortgage to work out the true cost.
The true cost takes into account both rates and fees for the term to give you the real-case scenario.
For example, a mortgage of £150,000 would cost £8189,48 in year one, according to MoneyFacts. However, taking a different product by the same lender, with an interest rate of 1.05 percent would cost £7,819, but with a lower fee of £995.
Other lenders offer deals with no fees, which can work out much cheaper.
For example, a rate of 1.47 percent with no fee would cost £7,173 in year one, showing quite a substantial saving.
These examples show that careful calculations are required and “one size doesn’t fit all”. Work with a specialist mortgage adviser to ensure you make the right choice with your mortgage product.
Bigger deposit, lower rate (generally)
This mortgage deal by Yorkshire is only available if you have 65 percent equity in your home. It therefore is only available to certain borrowers.
If you have considerable equity in your home, generally there is more selection on the mortgages available to you, and many mortgages will be attainable at a lower rate. This is because you are lower risk to a mortgage lender than a homeowner with a low Loan to Value (LTV).
Mortgages for Doctors and Dentists
If you are looking to move house, or buy an investment property in the near future, keep an eye out every week for our Mortgage Monday – updated rates and best deals, including 95% mortgage options for first-time buyers.
Sample best rate mortgages:
TERM | TYPE | LAST WEEK'S RATE | RATE OF INTEREST | GREAT FOR: |
---|---|---|---|---|
2 year | FIXED - 65% | 1.23% | 1.19% | Saving money by remortgaging |
2 year | TRACKER | 1.24% | 1.24% | Taking advantage of low Bank of England base rate |
3 year | FIXED - 65% | 1.59% | 1.59% | Saving money by remortgaging |
5 year | FIXED - 65% | 1.84% | 1.84% | Saving money by remortgaging |
10 year | FIXED - 65% | 2.49% | 2.49% | Long-term reassurance of low monthly payments |
2 year | FIXED (Offset) - 60% | 1.29% | 1.29% | Saving money by remortgaging |
2 year | FIXED - 90% | 1.95% | 1.95% | First-time buyers with small deposit |
2 year | FIXED - 85% | 1.52% | 1.39% | First-time buyers with small deposit |
2 year | FIXED - Buy-to-Let - 75% | 1.94% | 1.76% | Property investors with a moderate deposit |
Average lenders | Standard Variable Rate | 4.37% (Mar) | 4.28% (Apr) | Flexibility |
Read more of Chris’s monthly mortgage features:
- Mortgage overpayments – when is it right for you?
- Getting a mortgage with a low credit score – is it possible?
- Low rates are important but so are low fees
Get a mortgage review with Chris
If you would like us to undertake a review of your current mortgage or compare various mortgage deals across the market, please contact Chris:
Tel: 01403 780 770
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